As budget options dwindle, Louisiana legislators look at another increase in sales taxes _lowres (copy) (copy)

Advocate staff photo by BILL FEIG -- As Revenue Secretary Kimberly Robinson, left, and Administration Commissioner Jay Dardenne, right, watch Gov. John Bel Edwards answer questions during a press conference after a special legislative session in early 2016. Edwards is urging the Legislature to tackle a more ambitious reform of Louisiana's tax code when this year's regular session begins next month, including a plan to replace the corporate tax on profits with a corporate tax on sales.

Gov. John Bel Edwards settled on proposing to replace the state’s corporate tax on profits with a corporate tax on sales in part because voters in November rejected a different overhaul of the way Louisiana taxes businesses, the state's revenue secretary said in an interview Monday.

The plan on the November ballot, supported by only 44 percent of voters, would have eliminated a major corporate tax break in exchange for lowering the state's corporate income tax rate.

The result signaled to Edwards that voters and lawmakers would have little interest in approving a similar measure this year, or a similarly conceived plan that would scrap individual income tax breaks in exchange for a lower individual income tax rate.

“The governor heard the voters on that,” said Kimberly Robinson, the revenue secretary and Edwards’ point person on taxes.

The governor will release the specifics of his tax plan on March 27, three weeks before the Legislature begins a regular session devoted primarily to taxes and the budget.

He will propose replacing the state’s corporate income and franchise taxes with a corporate tax on sales, modeled on the system in Ohio. Companies there pay a tax of 0.26 percent on all sales.

Edwards also will propose ending a temporary one-cent increase in the state sales tax — approved by lawmakers last year but expiring in 2018 — while levying the sales tax on a number of activities and services not subject to taxation today, in order to offset the lost revenue.

In another change, Edwards wants all tax credits and exemptions eventually to expire, or “sunset,” unless the Legislature renews them after a review, to make sure that taxpayers are getting their money’s worth.

Forcing the Legislature’s hand is the 2016 decision by House Republicans to insist that the penny increase in the sales tax expire next year, a stratagem aimed at pushing officials to come up with a more permanent solution to the state's fiscal problems.

Edwards has been holding private meetings with legislative delegations from different parts of the state — Baton Rouge, New Orleans and the north shore so far, and north Louisiana on Wednesday — to brief them on his ideas.

Robinson said the proposed corporate tax on sales would raise “at least the same amount” as the corporate income and franchise taxes.

She said Edwards is studying whether all of the changes to the corporate tax system can be included in a single bill. This is something that many lawmakers would welcome, to reduce the number of negative marks they likely would receive on voting record scorecards compiled by business groups.

“If you’re going to have to take hard votes, it’s a lot better to take one vote rather than seven or eight votes,” said state Sen. Rick Ward, R-Port Allen.

Edwards’ corporate tax plan puts him in a curious position, because even though he has broadly endorsed the work of a blue-ribbon task force on taxes he created, the plan was not among the group’s recommendations.

Robinson said the task force, which she co-chaired, issued its preliminary recommendations in November, before voters rejected the corporate tax plan.

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Still, the task force chose not to propose a corporate tax on sales, known as a gross receipts tax, before issuing its final report in January.

Just as voters rejected the revisions to the corporate income tax in November, lawmakers have shown little interest in making changes to the individual income tax system, Robinson said.

Current law allows taxpayers to deduct, on their state income tax returns, the amount of taxes they pay on their federal tax returns. Taxpayers can also deduct on their state returns the itemized deductions they take on their federal tax returns that are in excess of the federal standard deduction.

The task force recommended eliminating the federal tax deduction, which would require voters’ approval, and reducing the excess itemized deduction. Both changes would raise more than $1 billion per year.

But Edwards is setting aside those recommendations, presumably deciding they would have little chance of being passed.

“Instead of heading down a road that looked like a dead end, they decided to try something different,” Ward said. “It doesn’t make a lot of sense to pursue something that will result in failure.”

Ward has endorsed the corporate tax on sales. Another key Republican, state Rep. Kenny Havard, R-St. Francisville, said he is studying whether to propose legislation to adopt the plan.

Havard said the corporate tax on sales would force the biggest companies to begin paying taxes by eliminating tax exemptions that benefit them, including a provision known as “net operating losses.”

“These top 200 companies will never pay taxes because of net operating losses,” he said. “They can keep writing them off each year.”

The Revenue Department says some 10,000 taxpayers have a total of $42.7 billion worth of "net operating losses" that they can carry forward. Insurers carry most of them, Robinson said.

A key question going forward is whether the House Republican leadership will back Edwards’ tax proposals, offer their own ideas or simply oppose him because he is a Democrat. House Republicans held a retreat on Thursday but did not settle their position.

Capitol insiders have taken note that House Speaker Taylor Barras, R-New Iberia, has filled two vacancies on the tax-writing Ways and Means Committee with two anti-tax conservatives, Reps. Alan Seabaugh, R-Shreveport, and Clay Schexnayder, R-Gonzales.

That will likely make it easier for conservatives to kill the tax measures in the committee.

Seabaugh voted against Edwards’ tax and budget measures last year and this year.

“I’m not sure that my idea of tax reform is the same as the governor’s,” Seabaugh said Monday, adding that he doesn’t like the gross receipts tax idea but is waiting to see the actual bill before making up his mind.

Schexnayder has mostly voted against the governor and said in an interview that he believes that trying to revamp the tax system ought to occur during a constitutional convention, not this year's legislative session.

Follow Tyler Bridges on Twitter, @tegbridges.